Philippines: The Future 5G Growth Market in ASEAN

The Philippines has been one of the early adopters of 5G technology with both Globe Telecom and Smart Communications (a subsidiary of PLDT) having launched their 5G networks in 2019 and 2020, respectively. Since then, the two Communication Service Providers (CSPs) have diligently invested in and rolled out their 5G networks.

Both CSPs recently reported on their overall performance for the year 2022. While the news has dwelled heavily on PLDT’s 60% decrease in its reported income, due to increased Capital Expenditure (CAPEX), it is not an accurate picture of PLDT’s performance for the year. There are things that PLDT has done well in 2022. Globe’s performance in 2022 had a similar profile.

How have the two CSPs done in 2022 in different areas? Both Globe Telecom and PLDT Group have reported an increase of about 4% in their total service revenue. For both CSPs, the mobile segment has played its role in supporting their strategies to improve performance and grow revenue. Mobile services increased by 8% in 2022 compared to the previous year, reaching about US$1.53 billion or ₱83.8 billion. PLDT Group reported an increase of 2% for its mobile data revenue in 2022 amounting to US$1.22 billion or ₱66.8 billion. Both CSPs also reported a large increase in total mobile data traffic in 2022 at 4,393 Petabytes (PB) (an increase of 21%) and 4,658 PB (an increase of 25%) for PLDT Group and Globe, respectively.

In terms of 5G’s part in this growth story, as of 2022, Smart, the main subsidiary of PLDT for cellular, reported more than 3 million devices connected to its 5G network, an increase of 161% compared to the previous year. In addition, the average data traffic going through its 5G network reached 13.26 PB per month compared to 3.25 PB per month at the end of 2021. As for Globe, the CSP reported more than 3.9 million devices on its 5G network in December 2022. Globe also recently claimed it has more than doubled its 5G footprint, covering 70 regional markets with more than 2,200 5G cell sites installed, while Smart has about 7,300 5G Base Transceiver Stations (BTS). It is crucial to understand that a cell site could contain more than a single BTS, so the number is not directly comparable between the two CSPs. In terms of 5G value-added services, Globe Telecom launched 5G Fixed Wireless Access (FWA) in 2019, while Smart Communications launched its prepaid Home Wi-Fi 5G at the end of 2021.

In comparison to the Philippines’ peers in the Association of Southeast Asian Nations (ASEAN) region, such as Indonesia, the Philippines’ performance has progressed relatively better. Indonesia only launched its first 5G network in mid-2021 by Telkomsel, Indonesia’s largest cellular provider, in three to eight cities. By the end of 2022, Telkomsel had fewer than 300 5G base stations active, while Indosat Ooredoo Hutchison and XL Axiata have yet to report on their numbers of 5G base stations in their 2022 reporting. Aside from the base station numbers, the total number of 5G subscribers can provide us with an alternative picture. However, there are no official 5G subscribers shared by all CSPs in Indonesia at this stage.

However, in comparison to Thailand, the Philippines is behind in terms of development. Thailand’s 5G base stations and subscribers far outstrip that of the Philippines. AIS, one of Thailand’s largest CSPs, deployed well over 25,000 5G base stations as of 2022. This corresponds to a 5G coverage of greater than 85% for AIS in Thailand. TrueMove H has not reported on nationwide coverage, but has rolled out 5G networks in key areas of the 77 provinces, with 99% population coverage in Bangkok’s Metropolitan Administration (BMA) and the Eastern Economic Corridor (EEC). Thailand’s third-largest CSP, DTAC, only reached 46% population coverage for 5G by the end of 2022.  With the rollout of the 5G network, 5G subscriptions could take off on a greater scale. By the end of 2022, Thailand’s 5G penetration rate is estimated to be more than 11%. Thailand has also moved ahead in terms of 5G applications, as covered in another ABI Insight.

The Philippines Market—Different Scale of Success in 5G? What’s Next?

The Philippines is in a good position to achieve 5G success. The benefits of being in the middle of the pack, in the ASEAN at least, means that the country could assess the success and pitfalls of 5G rollouts and monetization. At the same time, its government agencies could observe how policies could drive greater adoption and success of 5G, prompting the following questions:

1. Should there be policies to encourage the involvement of CSPs in the rollout of 5G private networks or should it be left to the industries and market players. (e.g., in China, CSPs are heavy involved in 5G enterprise implementations)?
2. How can CSPs work with the government to ensure workforce readiness to harness 5G for productivity and innovation (e.g., Singtel’s involvement in the 5G Academy)?
3. Should there be special economic zones to help drive 5G Research and Development (R&D) and 5G application trials (e.g., in Thailand, the EEC with its 5G NEXTGen Centre, among others)?

The Philippines is a key market in Asia-Pacific. ABI Research anticipates that its CSPs will continue with their 5G rollouts and existing network infrastructure upgrades. It can capitalize on its unique position in the middle of the pack in the ASEAN to learn from the early adopters and their 5G implementations. Aside from its position, the Philippines is expected to record annual Gross Domestic Product (GDP) growth around 6% for 2023 and 2024, which is above the average growth rate in Southeast Asia over the same period. Additionally, its unemployment figures improved in January 2023, lowering to 4.8% from 6.4% compared to the previous year. These factors point to a market with higher disposable income and being able to pay for value-added services or high-end products. After close to half a decade since the first 5G network was launched, one thing is for sure: monetization of 5G is not easy and there is a greater need to understand how CSPs can expand their revenue and profit margins from 5G enterprise applications. For now, it is clear that the Philippines and its CSPs still have some catching up to do with the leaders of the pack, but perhaps they have less time to capitalize on 5G technology.